Local News

Michigan Big Businesses Spend $7M To Keep Tax Cut Intact

August 2, 2014 / 6:51 PM EDT / CBS Detroit

DAVID EGGERT, Associated Press

LANSING (AP) — Big business is taking no chances to make sure voters approve a statewide referendum needed so a gradual $500 million cut in taxes on their machinery and equipment stays intact.

The Michigan Manufacturers Association, Detroit Three automakers and others had spent nearly $7 million promoting Proposal 1 with two weeks left before Tuesday's primary election, even though there's no organized opposition. The spare-no-expense effort reflects concern that voters will reject the ballot measure primarily out of confusion.

Prop 1 asks them to endorse a complicated funding mechanism designed to ensure local governments and schools are fully reimbursed as taxes are slashed on businesses' personal property such as machines and furniture. The plan received broad bipartisan support from the Legislature, Gov. Rick Snyder, the business community and groups representing counties, cities and townships.

The ballot question, however, includes alien terms like "local community stabilization share" and multiple references to the state's use tax — a tax less familiar to people than income, property or sales taxes. It also does not mention the personal property tax being replaced.

"We've worked really, really hard at making sure that voters understand that Proposal 1 means getting rid of an unfair, antiquated double tax on business and making communities whole for that lost revenue, all without raising anyone's taxes," said Kelly Rossman-McKinney, spokeswoman for Michigan Citizens for Strong and Safe Communities, which has spent millions on TV advertising, mailings and other promotional efforts.

The tax cut, which was approved in late 2012, phases out the tax on manufacturing equipment between 2016 and 2023. Starting this year, it also removes the tax for smaller businesses owning commercial equipment with a cash value under $80,000.

If Prop 1 is OK'd, local governments would see the lost money fully replaced by a portion of Michigan's 6 percent use tax on out-of-state purchases, lodging assessments and telecommunications. Manufacturers benefiting from the tax cut also would pay a new special assessment on industrial equipment estimated to be about 20 percent of their current personal property tax bill.

If the measure is defeated, the tax cuts will be halted — forcing legislators to return to the drawing board. Mayors and others fear that if Prop 1 fails, the Legislature will re-enact the tax cut without diverting replacement revenue to municipalities.

Top contributors to the Strong and Safe Communities ballot committee include the Michigan Manufacturers Association ($2.8 million), Ford Motor ($2 million), General Motors ($501,000), Dow Chemical ($500,000), Dow Corning ($250,000), Chrysler ($250,000), Alticor ($250,000) and Kellogg ($200,000).

High-dollar campaigns for passage of ballot issues are nothing new, but this one irks Warren Mayor Jim Fouts, one of the few public officials to come out against Prop 1. The measure would help "small businesses grow and create jobs," according to its wording, which Fouts said leaves out the biggest beneficiaries: industrial manufacturers.

"This election is being bought by special interest groups who will gain and who they say will benefit really aren't the people who will benefit," said Fouts, who doesn't trust that his city and others will be fully made whole with replacement revenue.

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Economy